By Marcela Ayres

BRASILIA (Reuters) – Brazil’s government has committed to adjusting corporate income tax as part of broader reform discussions, the country’s deputy finance minister said on Monday, adding that a debate on the matter would likely happen in 2025.

Speaking at an event hosted by brokerage XP (NASDAQ:), Dario Durigan emphasized that for now the government was fully focused on getting a spending containment package approved by Congress this year.

He noted that recent meetings with the heads of Brazil’s Senate and lower house made sure both the legislative and executive branches were aligned on that front.

“What we heard from both leaders is: ‘perfect, understood.’ Next (LON:) year, we’ll discuss income tax with the government’s commitment to present adjustments to corporate income tax, leading a broad national debate that won’t be resolved in a month or two – it will take at least the first half of next year, if not longer,” Durigan said.

He also mentioned that the government is discussing the taxation of dividend payments abroad to avoid creating incentives for fiscal domicile changes, with plans to present the topic when a bill is submitted to Congress.

Spending cuts were widely expected after the government signaled they were needed to sustain the fiscal framework approved last year, whose feasibility was challenged by rapidly rising mandatory expenses.

But to offset the unpopularity of the measures, the government announced an unexpected income tax reform raising middle-class exemptions.

This caused a meltdown in Brazilian assets amid higher risk premiums, as markets perceived the move as additional fiscal stimulus, despite officials later emphasizing that the reform would be fiscally neutral and effective only in 2026.

Durigan also stated that the government decided not to include changes to health and education budget floors in the package, as the potential fiscal gain was minimal compared to the significant political risk.